Other currencies get their value because the governments that provide them make people pay taxes. If you want to pay the tax the US government charges you, you're going to need some USD - so there's guaranteed demand, and hence intrinsic worth.
There's also other debt that the US government provides in USD - which provides value as well, in the form of bonds.
BTC has no such driver of wealth. Except perhaps money laundering/transfers without AML provisions.
Yeah bitcoin is (at best[0]) a kind of consensual hallucination, worth something because people believe it is. Fiat is someone with a Navy telling you it's worth money, it's very different.
[0] in practice there's a difference between the idea of a distributed digital currency and the ponzi schemes they give rise to I'm real life. Bitcoin is some greater fool thing, it's not a medium of exchange.
People value a way to store money securely in a place that can’t be physically robbed, that can be sent internationally with low fees quickly.
You don’t need anything else.
For years the haters on here would screech “but it’s volatile” - not really anymore. I wonder what they’ll decide to hate it for now, rather than changing priors.
According to your theory, all the thousands of shitcoins are valuable. But they're not.
There must be further reasons, then, that the price of Bitcoin is so high. And they're purely sentiment, I'd argue. If that changes, there's little to prevent the price from going down very far very fast. Unlike fiat.
It's brand name value. The same reason there's one basic OS, one internet search, one social network, one VOD site. People can tolerate few names for things and tend towards the default as a safe choice.
This doesn't explain why the currencies of different countries behave differently.
In my view, money is a technology. People use a technology if they find it to be useful. I know this sounds circular, but bear with me. A "major" currency is designed to be useful as a medium of exchange, temporary store of value, and tool of government economic policy. For it to serve these purposes, a government has to moderate its own behavior to some extent.
Thus my view is that the value of a major currency is based, not on the expectation of paying taxes in the future, but on more general expectations of the future behavior of the government.
With that said, paying taxes is good use for money that's a short term store of value, because you rarely need to hold onto your tax money for more than a year before paying it.
>Other currencies get their value because the governments that provide them make people pay taxes
That's demonstrably false, because countries like Zimbabwe and Venezuela experienced hyperinflation (the complete devaluation of a currency) in spite of the fact that their governments were still forcing people to pay taxes with those currencies. So clearly that alone is not enough to provide intrinsic worth to a currency.
Countries like Zimbabwe and Venezuela printed those currencies in vast quantities to pay bills instead of raising [most of] that money through taxes. Taxes owed in previous quarters were worthless compared with the new trillion dollar notes Zimbabwe's central bank issues to pay government officials, and most private transactions were black market so they weren't seeing them returned in taxes. Zimbabwe and Venezuela are the defining example of how a currency which isn't backed by mountains of debt and taxes is reliant entirely on speculators' confidence...
The reason for that devaluation is that trust was eroded. GP's premise is correct, that fiat has value because of governments, but the reasoning here is not fully correct. The value is in the trust that the government and the institutions will continue to function properly.
There's also other debt that the US government provides in USD - which provides value as well, in the form of bonds.
BTC has no such driver of wealth. Except perhaps money laundering/transfers without AML provisions.